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CHIEF EXECUTIVE OFFICER’S REPORT
GENERAL OVERVIEW The financial sector experienced a number of challenges emanating from the prevailing economic environment, the major one being cash shortages. Despite the high average prudential liquidity ratio recorded by most banks as at December 31, 2016, cash shortages remained a nightmare for the banking sector. The Reserve Bank of Zimbabwe introduced measures to deal with the cash shortages within the national economy whilst at the same time promoting exports. The measures include; the promotion of a cashless payment system by encouraging the use of plastic money, promoting the use of other currencies within the multi-currency basket, introducing cash withdrawal limits and bond notes which came into circulation in November 2016. In order to promote exports, the Reserve Bank of Zimbabwe introduced export incentives targeted at tobacco farmers, diaspora remittances and other export earnings. A foreign payments list which prioritises imports to ensure that foreign exchange is utilized efficiently on productive imports of goods and services was also put in place with a committee to manage compliance with this measure. Despite the challenges in the banking sector as a whole, the Bank’s performance in the year under review showed a remarkable improvement from prior years.
BANK PERFORMANCEThe Bank recorded a profit of $9.68 million in the year under review which was an improvement by 22% from 2015. The favourable performance is to a large extent attributed to the Bank’s emphasis on increasing revenue streams through introduction of new revenue generating products as well as emphasis on cost containment through tight expenditure control. These strategies had the e�ect of contributing positively to the bottom line. The Bank’s total deposits grew by 22% as a result of continuous deposit mobilisation and business development. The Bank has also continued to attract more deposits through its wide branch and agency network.
CORPORATE DEVELOPMENTSThe following highlights summarise the Bank’s corporate developments in the year 2016:
1. Development of new products, services and delivery channelsThe Bank’s growth is premised on the successful development of new and appropriate products and delivery channels, over and above full utilization of existing products and services. The following products and services were introduced in 2016:
• Mortgage financingDuring the year under review, the People’s Own Savings Bank introduced mortgage lending so as to increase its product o�ering to customers.
• Expansion of agency business In an e�ort to continue to extend its footprint and bring convenience to customers, the Bank recruited 2 more agencies with 54 outlets. The Bank will continue to improve on its delivery channels so as to become more accessible to customers.
• Chipinge sub branchIn order to increase its coverage, accessibility and visibility to customers, the Bank opened its doors to the Chipinge community by opening a sub branch. This initiative will assist in bringing convenience to customers in that area.
• Farmers’ productsThe Bank introduced products specifically targeting both commercial and communal farmers. In 2016, the Bank targeted mainly the tobacco farmers to enable them easy access to their funds.
• MoneyGram money transfer serviceIn order to boost its money transfer agency business, the Bank entered into an agency relationship with MoneyGram thus bringing the Bank’s total number of money transfer agencies to 3, including Western Union International and Mukuru.com.
• Bank to Wallet servicesIn partnership with Econet Wireless, the Bank successfully launched the Bank to Wallet service in December 2016.
• Bill paymentsIn order to continue to bring convenience to customers, City of Harare bill payments facility was added on to the mobile banking application platform.
2. Sta� developmentsIn recognition of the pivotal role played by members of sta� in contributing to the Bank’s success, the following developments took place in 2016:
• Introduction of e-learning platformThe Bank successfully introduced the e-learning platform which will go a long way in continuously developing and improving employees’ skills and knowledge.• Long service awards ceremonyIn an e�ort to honor employees for their loyalty and commitment to the Bank, the Bank held its maiden Long Service Award ceremony where a total of 81 employees were presented with Long Service Awards.
BRANCH NETWORKThe Bank operated through its 35 branches country wide as well as 296 agency outlets which largely cover rural communities nationwide and other urban areas in various parts of the country as the Bank continues with its financial inclusion mandate.
CHAIRPERSON’S STATEMENT
INTRODUCTIONI am pleased to present to you the audited financial results of the People’s Own Savings Bank for the year ended December 31, 2016.
OPERATING ENVIRONMENTThe operating environment remained challenging as economic growth was adversely a�ected by amongst other factors, weak domestic demand, tight liquidity conditions, the El Nino- induced drought, depressed commodity prices and a stronger United States dollar against other major trading currencies. Furthermore, the fiscal space remained constrained due to underperformance of domestic revenues, depressed exports, limited foreign direct investment and depressed capital inflows into the country.
Annual inflation remained in the negative territory albeit accelerating from -2.5% in December 2015 to -0.93% in December 2016. This trend is expected to continue owing to among other reasons, subdued international oil prices, low aggregate demand and an unstable South African rand against major currencies.
BANKING SECTOR OVERVIEW The Banking sector was not spared the current economic challenges. The worsening trade deficit and the inclination towards holding and externalizing physical cash continued to drain cash from the economy and the adverse e�ects were transferred to the banking sector resulting in massive cash shortages. The regulatory authorities introduced a number of policy measures to manage the cash shortages. Notwithstanding the prevailing economic challenges, the Reserve Bank of Zimbabwe reported that total money supply grew by 19.08% from $4.77 billion as at 31 December 2015 to $5.68 billion as at December 2016. The broad money supply continued to be dominated by short term deposits reflecting the preference to hold financial assets in the form of cash. On the other hand, banking sector credit increased by 14.75% to close at $6.38 billion as at December 2016 from $5.56 billion as at 31 December 2015. The introduction of bond notes in November 2016 brought some relief to the cash situation as at year end, and also resulted in an upward shift in the performance of the equity market, after a long dry spell.
FINANCIAL HIGHLIGHTS Despite the challenges in the operating environment and banking sector, the Bank posted a profit of $9.68 million in the year under review, up from a profit of $7.91 million in 2015. The following are the key financial highlights of the 2016 performance;• Net operating income for the year increased by 8% to $35.57million, compared to the previous year, attributed to introduction of new products and services which contributed to higher revenues;• A net impairment charge of $1.26 million was recorded for the year as compared to a net impairment recovery of $ 1.35 million for the previous year;• Operating expenses increased by 4% to $25.90 million and this was in line with business growth;• The cost to income ratio improved from 76% in 2015 to 73% in 2016, attributed to the growth in income which outweighed the increase in operating expenses; • Total assets grew by 22% to $164 million from $134 million in 2015 as a result of business growth;• Total deposits grew by 22% to $115 million from $94 million in 2015, attributed to aggressive deposit mobilisation through promotion of new and existing products and • The loan to deposit ratio declined to 58% from 78% in 2015 as a result of cautious and prudent lending.
CORPORATE GOVERNANCEThe board is committed to upholding the highest standards of corporate governance by ensuring that business is conducted in a transparent, responsible and accountable manner as guided by the National Corporate Governance Code for Zimbabwe. The Board will continue to uphold the Bank’s core values of integrity, innovation, commitment and responsiveness.
CORPORATE SOCIAL RESPONSIBILITYPOSB remains committed and dedicated to assisting communities in which it operates. During the year under review, the Bank continued to contribute towards community initiatives in the fields of education, health, sports and arts, financial inclusion and other social activities. OUTLOOKThe economy is expected to record modest GDP growth into 2017. This is provided that there is renewal of institutional and operational capacity in the public sector as well as a change in the investment climate. Despite the prevailing economic challenges in the country, Zimbabwe still has enormous potential for sustained growth and poverty reduction. Realising this potential however, will require a relook at policies that build confidence and set the economy towards a recovery path. The People’s Own Savings Bank maintains a positive view of its future and that of the economy at large. Beyond 2016, the Bank will continue to provide seamless service to existing and new customers. The Bank will also continue to invest in key economic areas so as to positively contribute to the overall improvement of the country’s economy as presented in the national economic blueprint, ZIMASSET.
APPRECIATIONI would like to thank our valued customers who have continued to show confidence in us. My sincere appreciation also goes to the Shareholder, the Regulator, Board, Management and Sta�, for the dedicated e�ort towards the achievement of the remarkable results and the success of the Bank.
M. DZUMBUNUBOARD CHAIRPERSON
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DIRECTORS: M Dzumbunu, I. P. Ndlovu, O Jambwa, I Mvere, M Mureriwa, C Nyamutswa, N. C. Chindomu, A Kandlela*, P Shuro* * Executive
Page 1
Abridged Audited Financial Results for the year ended 31 December 2016
LEGAL STATUSThe Bank is governed by the People’s Own Savings Bank of Zimbabwe Act {Chapter 24:22} and is also under the supervision of the Reserve Bank of Zimbabwe.
CORPORATE SOCIAL RESPONSIBILITYThe People’s Own Savings Bank is committed to making life changing contributions to communities in which it operates. To this end, the Bank participates in transformational programs which improve the livelihoods of the society at large. The Bank’s Corporate Social Responsibility program for 2016 focused on 4 primary areas as follows:
1 Financial literacy programsThe Bank participated in the Global Money Week (GMW) celebrations which took place from 14 to 20 March 2016. Furthermore, the Bank conducted a “Schools on the shop floor” program where students at secondary school level were attached at one of the Bank’s branches so as to appreciate and comprehend the banking environment.
2 Education The People’s Own Savings Bank continued to provide financial assistance to disadvantaged children on a scholarship basis across the 10 provinces. In the period under review, the Bank also donated funds towards payment of college fees for students from the Deaf Zimbabwe Trust.
3 Health The Bank donated funds to Kidzcan, an association for children living with cancer. The Bank also donated a 10,000 litre water tank to ZRP Kuyedza Women’s Club and also sponsored the sinking of a borehole at St Killian in Rusape.
4 Sports, Arts and CultureThe Bank participated and donated towards sports, art and culture activities which include the Chinhoyi University of Technology, the Bindura University of Science Education, the St Gerard’s church Golf Days, the Annual Interschool’s Mbira Festival, and the Pfumvudza Arts Festival.
AWARDS AND ACCOLADES TO THE BANKThe Bank was honoured with the following awards and accolades in year 2016:
1 Public Sector Finance Management Awards• Financial Management Award of Excellence in Innovative ResourcesManagement• Financial Management Award of Excellence in Revenue Collection, Credit Control and Risk Management• Financial Management Award of Excellence in Budgeting and Financial Planning• First runner up Financial Management Award of Excellence in Overall Best Financial Management• First runner up Financial Management Award of Excellence in Financial Turn Around of the Year and,• Second runner up Financial Management Award of Excellence in Debt Administration and Management.
2 Public Sector Management (PSMA) Awards The Bank scooped the “Best Corporate Social Responsibility Program Award of the Year” from PSMA, Stallone Consultants.
3 Agency Banking AwardThe Bank won the “Most Comprehensive Agent Banking Award” at the Inaugural Agent Banking & Digital Financial Services Awards 2016 by Mtilikwe Financial Services.
4 Zimbabwe Chamber of Small to Medium Enterprises (ZCSME) Awards The Bank scooped the “Business Excellence Award” in the category of SME finance supporters, Zimbabwe Chamber of Small to Medium Enterprises.
OUTLOOKLooking ahead, the Bank will continue to leverage on technology in its service delivery to the customers. The Bank will continue to invest in digital platforms that enhance customer experience as well as streamline work processes to ensure efficient service. The Bank will also emphasise going green in all its processes so as to contribute to a sustainable environment. Despite the challenges faced by the banking sector and the economy at large, the People’s Own Savings Bank is positive about its prospects for future growth. To this end, the Bank will continue to play a pivotal role in the banking sector by providing a broad range of a�ordable and accessible financial services and products. The Bank will also continue to foster financial inclusion as well as extend its product o�ering to reach all customer segments of our nation.
APPRECIATIONI would like to thank the Shareholder, Board, Management, Members of Sta� and Regulatory authorities for the continued support in reaching this milestone. My gratitude also goes to all stakeholders, especially our customers who continued to conduct business with us in the year 2016.
A. KANDLELACHIEF EXECUTIVE OFFICER
CORPORATE GOVERNANCE REPORT
The POSB Board attaches great importance to good corporate governance as it ensures integrity and transparency in managing the relationship between the Bank and its stakeholders which in turn positively impacts on the Bank’s operations and ultimate performance. In this regard it focuses on attaining high standards of corporate governance and ensures that its operations are in compliance with the legislation, policies and directives governing its operations key amongst these being the POSB Act {Chapter 24:22}, the Banking Act {Chapter 24:20}, the Companies Act {Chapter 24:03}, the Public Finance Management Act {Chapter 22:19}, the Procurement Act {Chapter 22:14}, the Corporate Governance Framework for State Enterprises and Parastatals Guidelines (2010) and the National Code on Corporate Governance Zimbabwe (2014).
The Board regularly reviews its structures and policies to ensure continued adherence to the governing instruments in terms of the law, policies or the RBZ corporate governance
guidelines and or directives and international best practices applicable to the Bank. The Board also recognizes that Zimbabwe as a country has taken the upholding of good corporate governance practices seriously by incorporating this as a national objective in the new constitution and as a key result area under the ZIMASSET, the country’s economic blueprint adopted for the period 2014 to 2018.
The attainment of good corporate governance, being a key strategic objective of the Bank thus compels the Bank to continue to observe the highest standards of ethics and professional conduct in executing the Bank’s business through the governance structures detailed below:
THE BOARDThe Board comprises of seven (7) independent non-executive directors and two (2) executive directors, the Chief Executive Officer and the Chief Accounting Officer. The detailed responsibilities of the Bank’s Board include the following;
• To set the Bank’s direction/objectives;• To approve the Bank’s policies;• To protect the interest of depositors and other stakeholders;• To align activities and behaviour to ensure the Bank operates in a safe and sound manner, in compliance with applicable laws and regulations;• To articulate the strategy against which the success of the overall Bank and the contribution of individuals is measured; and• To assign responsibilities and decision making authorities, incorporating a hierarchy of required approvals from management to the Board.
BOARD COMMITTEES AND MEETINGSThe Board as a whole is responsible for the oversight of management on behalf of the shareholder, the Government of Zimbabwe. To exercise its duties, the Board meets quarterly through scheduled meetings and whenever the need arises. To assist the Board in its oversight function, a number of Board Committees were established in accordance with section 14(i) of the People’s Own Savings Bank Act {Chapter 24:22}.
The Board held its second AGM in May 2016 to consider the 2015 financial statements. Details of the existing Board Committees are outlined in the following paragraphs:
1. Board Audit and Finance CommitteeThe Board Audit and Finance Committee is authorized by the Board to review and assess recommendations and reports of the finances, administration, procurement, financial controls of the Bank and the internal audit function and where appropriate, make recommendations of its own to the Board regarding the financial administration of the Bank.
CompositionI.P. Ndlovu (Non- Executive Committee Chairman)I. Mvere (Non- Executive Member)M. Mureriwa (Non- Executive Member)
The Board Chairperson, the Chief Executive Officer, the Chief Accounting Officer and Head-Internal Audit are not members of the Board Audit and Finance Committee but attend the meetings by invitation. External Auditors are invited to attend all meetings.
2. Board Credit and Investments CommitteeThe fundamental function of the Committee is to oversee the Bank’s operations relating to credit, market and liquidity risk in particular to ensure that the Bank has adequate funds to meet its obligations. It also oversees the marketing activities of the Bank and approves all lending and investment policies. Furthermore the Committee ensures that the approved policies are adequate and that lending and investment activities are conducted in accordance with the established policies and regulations.
The Committee has the mandate over risks underwritten by the Bank in as far as they a�ect its overall performance including particularly market risks and credit risks. The Committee is also responsible for approval of loans to customers within its limit.
CompositionI. Mvere (Non- Executive Committee Chairman)M. Mureriwa (Non- Executive Member)C. Nyamutswa (Non- Executive Member)A. Kandlela (Executive Member)P. Shuro (Executive Member)
The General Manager Banking Operations, the Treasury Executive and Marketing Manager are not members of the Committee but attend meetings by invitation.
3. Board Risk Management, Credit Review and IT CommitteeThe Committee is responsible for overall identification, measurement, management and monitoring of all risks facing the Bank. In the main, the Risk management Committee is responsible for the formulation of high level risk management policies and for inculcating a risk management culture throughout the Bank. The Committee is also responsible for overseeing the harmonization and integration of IT processes; for ensuring the Disaster Recovery Plan is in place and to ensure that other issues relating to IT requirements of the Bank are timeously addressed.
The Committee is also tasked with the primary responsibility of monitoring the performance of the loan book and ensuring that it is proficiently managed and appropriately diversified to manage concentration risk. It also has the broad responsibility of ensuring that the Bank’s potential and specific bad debts are adequately provided for and that the total loan book is in compliance with the lending guidelines and the Bank’s credit policy.
CompositionN. Chindomu (Non-Executive Committee Chairperson)O. Jambwa (Non- Executive Member)I. P. Ndlovu (Non- Executive Member)
The Chief Executive Officer, The General Manager Risk & Compliance and the IT Executive are not members of the Board Risk Management, Credit Review and IT Committee but attend its meetings by invitation.
4. Board Human Resources CommitteeThe Board Human Resources Committee is tasked to look into issues relating to the formulation and approval of strategies and policies relating to the remuneration and terms and conditions of all Bank sta�. The Committee is also mandated to consider and approve management recommendations on succession planning, management and development of human resources as well as reviewing the Bank’s organisational structure.
M. DZUMBUNU
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Page 2
DIRECTORS: M Dzumbunu, I. P. Ndlovu, O Jambwa, I Mvere, M Mureriwa, C Nyamutswa, N. C. Chindomu, A Kandlela*, P Shuro* * Executive
Abridged Audited Financial Results for the year ended 31 December 2016
CompositionO. Jambwa (Non- Executive Committee Chairman)N. Chindomu (Non- Executive Member)C. Nyamutswa (Non- Executive Member)M. Dzumbunu (Non- Executive Member)A. Kandlela (Executive Member)P. Shuro (Executive Member)
The Human Resources Executive is not a member of the Committee but attends its meetings by invitation.
MANAGEMENT COMMITTEESThe Bank has put in place a number of management committees that assist in steering the Bank’s operations. The prominent management committees are briefly highlighted as follows:
M. DZUMBUNU
I.P. NDLOVU
O. JAMBWA
N. CHINDOMU
I. MVERE
M. MURERIWA
C. NYAMUTSWA
A.KANDLELA**
P. SHURO**
DIRECTORS ATTENDANCE AT BOARD MEETINGS FOR 2016
Key* - Leave of Absence granted ** - Executive Directors N/A - Not applicable
BOARD MEETINGS (6)
6
6
6
6
6
6
6
6
5*
HUMAN RESOURCES COMMITTEE (7)
7
N/A
7
7
N/A
N/A
7
7
3*
RISK, CREDIT REVIEW & IT COMMITTEE (4)
N/A
4
4
4
N/A
N/A
N/A
4
N/A
AUDIT COMMITTEE (7)
7
7
N/A
N/A
6*
7
N/A
7
4*
CREDIT AND INVESTMENTS COMMITTEE (5)
N/A
N/A
N/A
N/A
5
5
4*
5
2*
MINISTRY OF FINANCE MEETING (1)
1
1
1
1
1
1
1
1
1
ANNUAL GENERAL MEETING (1)
1
1
1
1
1
1
1
1
*
1 Executive Committee (EC)The Executive Committee has the mandate to manage the a�airs of the Bank between meetings of the Board. The Committee’s main function is to operationalize the strategy of the Bank as well as review significant functions of the Bank and recommend action as appropriate to the Board. The Executive Committee also handles matters that are not assigned to any specific management committee and as may be delegated by the Board. Membership of the Executive Committee comprises the Chief Executive Officer as Chairman and the Executive Management team.
2 Management Assets/Liabilities Committee (ALCO)The Bank has a management Assets/Liabilities Committee, which meets on a monthly basis to review the product pricing, credit, liquidity and market risk positions. The Committee considers exposure positions of the Bank and formulates strategies based on balanced risk and return on investments. The Committee also reviews the Bank’s statement of financial position and recommends the optimal asset and liability mix which should be carried by the Bank.
3 Other prominent management committeesOther management committees that exist within the Bank include the Management Credit Committee, Purchasing Committee and the IT Steering Committee. The IT Steering Committee is mandated to oversee the IT processes and continuous improvement of IT systems and procedures. The Purchasing Committee oversees the purchase of all material capital and operational expenditure as guided by the State Procurement Board to ensure compliance thereof and e�ective cost monitoring. The Management Credit Committee is responsible for advancing credit within its limit.
4 Continuous Review of Governance Structures and PracticesThe Board continuously reviews its structures, practices and Bank policies with the view of aligning them with the law and best practices which exercise has already seen the Board put in place a Board Charter and the Code of Ethics for the Bank. The Bank subscribed to Tip O�s Anonymous administered by Deloitte. The membership is driven by the desire to combat fraud, corruption, theft, and all unethical practices within the Bank or with parties dealing with the Bank. This process encourages whistle blowing to e�ectively stamp out such vices.
DIRECTORS’ RESPONSIBILITY STATEMENTThe responsibility for the preparation and integrity of the financial statements that would fairly present the state of a�airs of the Bank at the end of the financial year lies with the Board. The financial statements were prepared according to International Financial Reporting Standards.
These results were prepared under the supervision of Patience M. Shuro (ACCA) PAAB Registered Accountant number 04123.
AUDITOR’S STATEMENTThese abridged financial results should be read in conjuction with the complete set of financial statements for the year ended 31 December 2016 which have been audited by the Office of the Auditor - General Zimbabwe who have issued an unmodified audit opinion thereon and have included a section of key audit matters in the report.
The auditor’s report on these financial statements is available for inspection at the Bank’s registered office.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEfor the year ended December 31, 2016
15,015,370
(2,783,675)
12,231,695
(1,262,285)
10,969,410
21,837,914
36,171
183,297
(5,000)
2,550,120
35,571,912
(25,895,482)
9,676,430
(127,812)
-
-
9,548,618
13,421,795
(3,872,727)
9,549,068
1,345,486
10,894,554
20,904,768
45,688
143,655
51,844
871,467
32,911,976
(25,004,465)
7,907,511
(688,925)
404,165
-
7,622,751
5
6
10.5
7
8
9
12.1
Interest income
Interest expense
Net interest income
(Increase)/ decrease in impairment losses on loans and advances
Net interest income after impairment losses
Fees and commission income
Dividend income
Profit on disposal of financial assets at fair value through other comprehensive income
Fair value (loss)/gain on investment properties
Other operating income
Net operating income
Operating expenses
Profit for the year
Other comprehensive income
Items that will not be reclassified to profit or loss
Fair value loss on financial assets at fair value through other comprehensive income
Revaluation gain of non-current assets
Items that will be reclassified to profit or loss
Total comprehensive income for the year
STATEMENT OF CHANGES IN EQUITY for the year ended December 31, 2016
Balance at January 01, 2015Profit/(Loss) for the year Other comprehensive incomeFair value loss on financial assets at fair value through other comprehensive incomeRevaluation gain on non-current assetsTotal other comprehensive incomeTotal comprehensive incomeRecapitalisation by shareholderDerecognition of investment equitiesDividendBalance at December 31, 2015Profit/(Loss) for the yearOther comprehensive incomeFair value loss of financial assets at fair value through other comprehensive incomeTotal other comprehensive incomeTotal comprehensive incomeIncrease in share capitalDividendBalance at December 31, 2016
Sharecapital
US$
6,729,662
-
-----
- 6,729,662
-
---
--
6,729,662
Capital contribution
reserveUS$
-
-
----
12,280,000-
12,280,000-
---
620,000
12,900,000
Revenuereserve
US$
6,644,396
7,907,511
---
7,907,511-
(315,274)(313,021)
13,923,6129,676,430
--
9,676,430
-
(1,976,878) 21,623,164
Mark- to- market reserve
US$
34,009
-
(688,925)-
(688,925)(688,925)
- 315,274
-(339,642)
-
(127,812)
(127,812)(127,812)
--
(467,454)
Revaluation reserves
US$
2,667
-
-404,165404,165404,165
- -
-406,832
-
---
--
406,832
Total
US$
13,410,734
7,907,511
(688,925) 404,165
(284,760)7,622,751
12,280,000
-(313,021)
33,000,4649,676,430
(127,812)
(127,812)9,548,618
620,000(1,976,878)41,192,204
NOTES TO THE FINANCIAL STATEMENTSfor the year ended December 31, 2016
1. REPORTING ENTITY AND ITS NATURE OF BUSINESSThe People’s Own Savings Bank is a corporate body established in terms of section 3 of the People’s Own Savings Bank of Zimbabwe Act, [Chapter 24:22] of 1999, to provide savings, banking and financial services in Zimbabwe. The Bank accepts deposits that will accumulate interest for the benefit of the depositors and all deposits are government guaranteed. The Bank is also a member of the Deposit Protection Board.The Bank’s head office is at Causeway Building, Corner 3rd Street/Central Avenue, Harare, Zimbabwe.
2. BASIS OF PREPARATION
2.1 Statement of complianceThe financial statements for the year ended December 31, 2016 have been prepared in accordance with applicable International Financial Reporting Standards (IFRS) and the International Financial Reporting Interpretations Committee (IFRIC) interpretations promulgated by International Accounting Standards Board (IASB) which include standards and interpretations approved by the IASB, International Accounting Standards (IAS) as well as Standing Interpretations Committee (SIC) and other relevant statutory requirements. The full signed annual report can be obtained from the Bank’s head office upon request.
The Bank’s financial statements for the year ended December 31, 2016 were authorized for issue in accordance with a resolution of the directors on 14 March 2017.
2.2 Basis of measurement The financial statements have been prepared on a historical cost basis except for the following items:• Financial assets measured at fair value with changes presented in other comprehensive income,• Investment properties measured at fair value and• Revalued property, plant and equipment.
STATEMENT OF FINANCIAL POSITION as at December 31, 2016
2,505,92220,848,860
119,010,24013,071,770
728,446415,000
5,038,1242,714,554
164,332,916
114,707,2418,433,471
123,140,712
6,729,66212,900,000
(467,454)406,832
21,623,16441,192,204
164,332,916
3,424,830161,686
106,748,13512,872,835
1,609,200420,000
5,563,3502,899,270
133,699,306
93,684,2877,014,555
100,698,842
6,729,66212,280,000
(339,642)406,832
13,923,61233,000,464
133,699,306
1011
12.112.21314
1516
17.117.217.3
ASSETSCash and balances with banksBalances with the Central BankFinancial assets at amortised costOther assetsFinancial assets at fair value through other comprehensive incomeInvestment propertiesProperty, plant and equipmentIntangible assetsTOTAL ASSETS
LIABILITIESCustomer depositsOther liabilitiesTOTAL LIABILITIES
CAPITAL AND RESERVESShare capitalCapital contribution reserveMark-to-market reservesRevaluation reserveRevenue reservesTOTAL CAPITAL AND RESERVES
TOTAL LIABILITIES AND EQUITY
STATEMENT OF CASH FLOWS for the year ended December 31, 2016
9,676,430
1,262,285(207,183)
41,4375,000
(41)(94,020)
-(183,297)1,076,207
413,473
11,990,291
10,456,269 (12,801,153)
23,257,422
22,446,560
114,13716,641
947,955(12,643)
-(609,059)(228,757)
(2,792,431)
(1,976,878)(815,553)
19,768,2663,586,516
23,354,782
7,907,511
(1,345,486)2,347,414
1,134(51,844)
(41)38,679
9,818 (143,655)
1,023,585376,523
10,163,638
(17,734,214)(28,346,246)10,612,032
(7,570,576)
(1,020,367)6,385
798,036(26,246)(53,156)
(1,503,484)(241,902)
(2,038,271)
(313,021)(1,725,250)
(10,629,214)14,215,730
3,586,516
12.2
13
1314
Operating activities
Profit/(Loss) for the yearAdjustments for non- cash itemsIncrease/(decrease) in Impairment loss on financial assets at amortised cost(Decrease)/increase in provision for impairment of other receivablesLoss /(profit) on disposal of property, plant and equipmentDecrease/(increase) in fair value of investment propertiesScrip dividendForeign exchange (gain)/ loss Unquoted shares written o�(Profit)/ loss on disposal of financial assets at fair value through other comprehensive incomeDepreciation of property, plant and equipmentAmortisation of intangible assets
Operating cash flow before changes in operating assets and liabilities
Changes in operating assets and liabilitiesIncrease in financial assets at amortised cost and other assetsIncrease in deposits and other liabilities
Net cash flows from operating activities
Cash flows from investing activitiesProceeds from sale of property, plant and equipmentProceeds from sale of financial assets at fair value through other comprehensive incomePurchase of financial assets at fair value through other comprehensive incomePurchase of investment propertiesPurchase of property, plant and equipmentPurchase of intangible asset
Cash flows from financing activitiesDividend paidRepayment on long term borrowing
Net increase/(decrease) in cash and cash equivalentsCash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Dec 16US$
Dec 15US$
Notes
Dec 16US$
Dec 15US$
Notes
Dec 16US$
Dec 15US$
Notes
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Dec-16US$
Dec-15US$
10.4.2 Money Market Assets
Maturing within 1 yearMaturing after 1 year but within 5 years
10.4.3 Capitalisation Treasury Bills
Maturing after 5 years
31,372,1418,774,394
40,146,535
Dec-16US$
13,072,222
13,072,222
22,803,993 -
22,803,993
Dec-15US$
12,280,000
12,280,000
7. FEES AND COMMISSION INCOME
Retail banking fees and commissionCredit related feesMoney Transfer Agency commission
8. OTHER OPERATING INCOME
Foreign exchange (loss)/ gainLoss on disposal of property,plant and equipmentDiscount income on treasury billsMiscellaneous income
19,440,8602,137,159
259,89521,837,914
94,989
(41,437)2,369,523
127,045 2,550,120
17,946,1482,294,308
664,31220,904,768
(38,679)
(1,134)820,931
90,349871,467
10.5.1 Provision for Impairment Allowances on Loans and Advances
Individual Lending
US$
2,618,001631,531
-3,249,5322,660,322
589,2103,249,532
1,971,887646,114
-2,618,0011,972,296
645,7052,618,001
Corporate lending
US$
2,928,953635,434
(668,175)2,896,2122,865,560
30,6522,896,212
2,618,233310,720
-2,928,9532,862,633
66,3202,928,953
TotalUS$
5,546,9541,266,965(668,175)
6,145,7445,525,882
619,8626,145,744
4,590,120956,834
-5,546,9544,834,929
712,0255,546,954
Dec-16
At January 1, 2016Charge for the yearBad debts written o�As at December 31, 2016Specific provisionsGeneral provisions Dec-15At January 1, 2015Charge for the yearBad debts written o�As at December 31, 2015Specific provisionsGeneral provisions
10.5.2 Provision for Impairment Allowances on Money Market Assets
At January 1Decrease in impairment allowances for the yearAs at December 31Specific provisionsGeneral provisions
Dec-16US$
1,004,135
(4,680)999,455999,455
-
999,455
Dec-15US$
3,306,455
(2,302,320)1,004,1351,004,135
-
1,004,135
11. OTHER ASSETS
Accounts receivablePrepaymentsInventoryAgency outstanding net deposits
Dec-16US$
6,135,386 375,706 436,8006,123,878
13,071,770
Dec-15US$
4,229,338
633,983967,271
7,042,243
12,872,835
12. ASSETS MEASURED AT FAIR VALUE
Fair value measurements at the end of the reportingperiod using
Quoted pricesin active markets
for identical assets
(Level 1)
Significant other
observable inputs
(Level 2)
Significant unobservable
inputs
(Level 3)TotalUS$
Dec-16Recurring fair value measurements
Equity securities:CommunicationFinancial services industryManufacturing industryReal estate industryOther
Total equity securities
Investment properties:Residential - BulawayoCommercial - KwekweResidential - HarareTotal investment properties
Total recurring fair value measurement
Dec-15Recurring fair value measurements
Equity securities:CommunicationFinancial services industryManufacturing industryReal estate industryOther
Total equity securities
Investment properties:Residential - BulawayoCommercial - KwekweResidential - HarareTotal investment properties Total recurring fair value measurement
307,663-
322,040-
73,465
703,168
----
703,168
Quoted prices in active
markets for identical
assets (Level 1)
216,287203,004408,148395,063360,452
1,582,954
----
1,582,954
-25,278
---
25,278
-
--
25,278
Significant unobservable
inputs (Level 3)
-26,246
---
26,246
-
--
26,246
-----
-
90,00095,000
230,000415,000
415,000
Significant other
observable inputs
(Level 2)
-----
-
90,000100,000230,000420,000
420,000
307,66325,278
322,040-
73,465
728,446
90,00095,000
230,000415,000
1,143,446
Total
216,287229,250408,148395,063360,452
1,609,200
90,000100,000230,000420,000
2,029,200
10.5 Provision for Impairment Allowances for Financial Assets at Amortised Cost
At January 1Increase/ (decrease) in impairment lossesCorporate LendingIndividual LendingInterbank placementsBad debts written o�As at December 31Specific provisionsGeneral provisions
2016US$
6,551,0891,262,285
635,434631,531
(4,680)(668,175)
7,145,1996,525,337
619,862
7,145,199
2015US$
7,896,575(1,345,486)
310,720646,114
(2,302,320)-
6,551,0895,839,064
712,025
6,551,089
10.1 Loans and Advances
Individual loansCorporate loansMortgage loansMicrofinance loans
Interest accruedGross totalProvision for impairment losses
10.2 Money Market Assets
Treasury billsInterbank placements
Interest accruedGross totalProvision for impairment losses
Dec-16US$
61,569,2988,940,472
348,646821,945
71,680,3611,256,321
72,936,682 (6,145,744)66,790,938
Dec-16US$
32,807,9896,999,455
39,807,444339,091
40,146,535(999,455)
39,147,080
Dec-15US$
65,811,34710,167,709
-658,864
76,637,9201,577,311
78,215,231 (5,546,954)72,668,277
Dec-15US$
16,483,634
6,004,13522,487,769
316,22422,803,993(1,004,135)
21,799,858
10. FINANCIAL ASSETS MEASURED AT AMORTISED COST
Included in administration expenses are operating rental expenses amount-ing to $1,269,922 (2015: $1,395,190) relating to properties which the Bank leases under Operating lease agreements.
The maturity analysis is based on the remaining periods to contractual maturity from year end.
Inventory includes $254,080 which relates to land bought by the Bank for mortgage investment in 2015.
11.1 Agency Outstanding Net Deposits
Outstanding balanceProvision for impairment
Dec-16 US$
8,165,171
(2,041,293)
6,123,878
Dec-15 US$
9,389,657(2,347,414)
7,042,243
12.1 Financial Assets at Fair Value through other Comprehensive Income
2,936,03826,246
41(9,818)
(654,382)(688,925)
-
1,609,200
1,609,20012,643
41-
(764,658)(127,812)
(968)
728,446
Opening balanceAdditionsScrip dividendUnquoted shares written o�DisposalsFair value lossForeign exchange loss on foreign shares
Closing balance
All quoted financial assets at fair value through other comprehensive income are recorded at fair value as at the reporting period. Unquoted financial assets at fair value through other comprehensive income are recorded at fair value using a valuation technique based on unobservable inputs and/ or assumptions.
12.2 Investment Properties
315,00053,156
-51,844
420,000
420,000--
(5,000)
415,000
Opening balanceAdditionsReclassification from property, plant and equipmentFair value (loss)/gain
Closing balance
Investment properties were accounted for using the fair value model. In respect of the closing balances, valuations were carried out as at December 31, 2016 by Sworn appraisers, EPG Global and these were based on market values.
Dec-16US$
Dec-15US$
Dec-16US$
Dec-15US$
Dec-16US$
Dec-15US$
Dec-16US$
Dec-15US$
Dec-16US$
Dec-15US$
Dec-16US$
Dec-15US$
DIRECTORS: M Dzumbunu, I. P. Ndlovu, O Jambwa, I Mvere, M Mureriwa, C Nyamutswa, N. C. Chindomu, A Kandlela*, P Shuro* * Executive
Abridged Audited Financial Results for the year ended 31 December 2016
Dec-16US$
Dec-15US$
13. PROPERTY, PLANT AND EQUIPMENT
Opening carrying amount Gross carrying amountAccumulated depreciationDisposals
Revaluation surplusAdditions at costDepreciation
Closing carrying amount
Gross carrying amountAccumulated depreciation
5,563,3509,471,042
(3,907,692)(58,078)
-609,059
(1,076,207)
5,038,124
9,952,215 (4,914,091)
4,686,8057,713,143
(3,026,338)(7,519)
404,1651,503,484
(1,023,585)
5,563,350
9,471,042 (3,907,692)
Land & Buildings
US$
2,023,0492,023,049
--
--
(40,726)
1,982,323
2,023,049 (40,726)
Motor Vehicles
US$
936,1842,189,595
(1,253,411)(53,337)
-127,121
(328,700)
681,268
2,207,717(1,526,449)
Computer Equipment
US$
1,385,7833,146,129
(1,760,346)(600)
-212,869
(457,986)
1,140,066
3,353,022(2,212,956)
Furnitureand Fittings
US$
891,3091,131,267(239,958)
(3,278)
-206,438
(127,325)
967,144
1,331,786(364,642)
Office Equipment
US$
327,025981,002
(653,977)(863)
-62,631
(121,470)
267,323
1,036,641(769,318)
2.3 Functional and presentation currencyThe Bank’s financial statements are presented in United States dollar, which is the Bank’s functional currency. Transactions in other currencies are initially recorded at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in other currencies are translated at the rate ruling at the Statement of financial position date. All exchange gains and/ or losses are taken to the Statement of profit or loss and other comprehensive income.
2.4 New and amended standards and interpretations A list of the new and amended IFRS and IFRIC interpretations adopted in 2016 and those not yet due for adoption are in the Bank’s annual report and are available at the registered office for inspection.
2.5 Going Concern The Board has reassessed the operations of the Bank and is confident that the Bank continues to be a going concern. Accordingly the financial statements continue to be prepared on a going concern basis.
3 SIGNIFICANT ACCOUNTING POLICIESThe accounting policies used in the preparation of the financial statements are consistent with the ones used in the previous year. A full set of the Bank’s accounting policies are available in the annual report, which is ready for inspection at the Bank’s registered office.
RetailBanking
2016US$
Total2016US$
IncomeThird partyInter–segment
Provision for impairment loss
Net operating income
ResultsInterest income Interest expense Net interest income
Fees and commission
Depreciation of property, plant and equipment Amortisation of intangible assets
Segment profit/ (loss)
AssetsAdditions to property, plantand equipment Additions to intangible assets
Total assets Total liabilities
261,691-
261,691-
261,691
310,417-
310,417
(48,719)
294,983113,331
(1,069,004)
180,834228,757
30,596,6958,198,388
3,317,479-
3,317,4794,680
3,322,159
1,827,848(1,492,435)
335,413
2,982,066
17,8786,869
2,041,279
1,328-
60,204,98331,378,240
1,001,850929,530
1,931,380(584,707)
1,346,673
929,530(147,700)781,830
220,020
17,8436,855
46,140
39,399
-
6,486,6994,896,698
32,253,177(929,530)
31,323,647(682,258)
30,641,389
11,947,575(1,143,540)10,804,035
21,449,135
745,503286,418
8,658,015
387,498-
67,044,53978,667,386
36,834,197-
36,834,197(1,262,285)
35,571,912
15,015,370(2,783,675)12,231,695
24,602,502
1,076,207413,473
9,676,430
609,059228,757
164,332,916123,140,712
IncomeThird partyInter–segment
Provision for impairment loss
Net operating income
ResultsInterest income Interest expense Net interest income
Fees and commission
Depreciation of property, plant and equipment Amortisation of intangible assets
Segment profit/ (loss)
AssetsAdditions to property, plantand equipment Additions to intangible assets
Total assets Total liabilities
656,021-
656,021
-
656,021
293,496-
293,496
362,553
298,344109,838
(513,663)
231,252241,902
10,619,7575,760,163
1,811,910127,390
1,939,300
2,302,320
4,241,620
1,495,855(848,450)647,405
1,164,505
17,4946,433
3,392,526
3,633-
44,009,28720,259,201
(72,351)545,838473,487
(957,065)
(483,578)
545,838(874,868)(329,030)
256,651
14,2395,236
(1,361,333)
30,312-
3,948,4803,361,780
29,170,910(673,228)
28,497,682
231
28,497,913
11,086,606(2,149,409)8,937,197
20,233,713
693,508255,016
6,389,981
1,238,287-
75,122,08271,317,698
31,566,490-
31,566,490
1,345,486
32,911,976
13,421,795(3,872,727)9,549,068
22,017,422
1,023,585376,523
7,907,511
1,503,484241,902
133,699,606100,698,842
5. INTEREST INCOME
Money market assets Corporate loansIndividual loansMortgage loansMicrofinance loansOther Interest
Dec-16US$
1,827,845952,228
10,519,3697,214
434,5761,274,138
15,015,370
Dec-15US$
1,622,9771,131,6419,449,848
-307,003910,326
13,421,795
6. INTEREST EXPENSE
Individual accountsCorporate accountsTerm depositsLong term borrowing
Dec-16US$
1,070,615105,148
1,585,95221,960
2,783,675
Dec-15US$
1,898,647276,914
1,593,005104,161
3,872,727
CorporateBanking
2016US$
Treasury2016US$
Head Office2016US$
RetailBanking
2016US$
Total2016US$
CorporateBanking
2016US$
Treasury2016US$
Head Office2016US$
Sta� costsAgency feesAdministration costsFraud and forgeriesAudit feesDepreciation of property, plant and equipmentAmortisation of intangible assets(Decrease)/increase in provision for impairment on other receivables
11,261,3682,813,400
10,482,351-
55,866
1,076,207413,473
(207,183)
25,895,482
9,922,5581,732,9109,550,533
5,89245,050
1,023,585376,523
2,347,414
25,004,465
9. OPERATING EXPENSES
10.3 Capitalisation Treasury Bills
Treasury bills Interest accruedGross totalProvision for impairment losses
Financial Assets at amortised cost
10.4 Maturity Analysis
10.4.1 Loans And Advances
Maturing within 1 yearMaturing after 1 year but within 5 yearsMaturing after 5 years
Dec-16 US$
12,900,000172,222
13,072,222-
13,072,222
119,010,240
51,847,12120,081,247
1,008,31472,936,682
Dec-15US$
12,280,000-
12,280,000-
12,280,000
106,748,135
61,694,63515,545,920
974,67678,215,231
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Private BankingBank your way.
Banking par excellence
Page 3
4 SEGMENT REPORTINGThe following table presents income and profit certain asset and liabilty information regarding the Bank’s operating segments.
Dec-16US$
Dec-15US$
Short term employee benefitsTermination benefitsPost-employment benefits
1,235,02524,378
163,366
1,114,39423,330
150,848
20.2 Non Executive Directors’ Fees
Dec-16US$
116,750
Dec-15US$
77,408
Opening balanceAdvances during the yearTransfer to ordinary loanRepayments during the year
Closing balance
Dec-16US$
118,623-
(108,465) (10,158)
-
Dec-15US$
171,04629,750
- (82,173)
118,623
20.3 Loans to Non-executive Directors
Dec-16US$
Dec-15US$
Mortgage loansPersonal loans
1,004,686507,758
1,512,444
974,676171,283
1,145,959
Key management personnel refers to the Bank’s executive management team which consists of the Chief Executive Officer, the General Manager Finance and Administration, the General Manager Banking Operations, the General Manager Risk and Compliance, the Human Resources Executive, the Treasury Executive, the Information Technology Executive, the Head of Internal Audit, the Marketing Manager, the Head of Mortgages and Property Development and the Company Secretary and Legal advisor.
Mortgage and personal loans are contractual and their repayments are up to date.
DIRECTORS: M Dzumbunu, I. P. Ndlovu, O Jambwa, I Mvere, M Mureriwa, C Nyamutswa, N. C. Chindomu, A Kandlela*, P Shuro* * Executive
Abridged Audited Financial Results for the year ended 31 December 2016
20.4 Terms and Conditions of Related Party TransactionsThe above mentioned outstanding balances arose from the ordinary course of business. Loans to non-executive directors of the Bank were at the Bank’s normal lending rates, terms and conditions. Outstanding balances at year end were secured. The Bank has not made any specific provision for doubtful debts relating to amounts owed by related parties as at December 31, 2016.
21. RISK MANAGEMENT AND CONTROL 21.1 Overview of the Bank’s risk philosophyThe Bank methodically analyses and addresses all risks perceived to have a significant bearing on its operations with the ultimate goal of achieving sustained benefits. To this end, the Bank has embraced the Enterprise wide Risk Management approach to ensure risks are holistically managed. Continued compliance with Basel requirements promotes stronger risk management and governance practices. In addition, periodic stress tests are conducted to assess the Bank’s vulnerability to severe market conditions with the view of coming up with proactive measures.
In line with the anti-money laundering and counter financing of terrorism standards, the Bank is mandated to carry out periodic risk assessments. In this regard, the Bank carried out its first money laundering and financing of terrorism risk assessment to identify and assess the risks it is exposed to with the view of determining the appropriate risk based control measures in the year under review. Assessments of this nature shall be conducted annually or more frequently whenever there are any material changes in the operating environment.
To assure continuation of the Bank’s core activities before, during, and most importantly after a major crisis event, the Bank has a comprehensive business continuity and disaster recovery plan that is periodically tested and enhanced. The Bank also conducts periodic risk management campaigns to continuously remind and equip sta� on money laundering and other risk issues.
Dec-16US$
Dec-15US$
14. INTANGIBLE ASSETS
Opening carrying amount Gross carrying amountAccumulated amortisationAdditionsAmortisation charge during the year
Closing carrying amount
Gross carrying amountAccumulated amortisation
2,899,2704,595,091
(1,695,821)228,757
(413,473)
2,714,554
4,823,848 (2,109,294)
3,033,8914,353,189
(1,319,298)241,902
(376,523)
2,899,270
4,595,091 (1,695,821)
Dec-16US$
Dec-15US$
15. CUSTOMER DEPOSITS
Individual accountsCorporate accounts Term deposits
62,924,33514,674,36237,108,544
114,707,241
61,752,44210,306,35221,625,493
93,684,287
Dec-16US$
Dec-15US$
16. OTHER LIABILITIES
Interest payable on depositsAccounts payableProvisionsLong term borrowingDeferred fee income
447,4046,481,354
443,521-
1,061,192
8,433,471
688,8634,064,356
200,568815,553
1,245,215
7,014,555
Dec-16US$
Dec-15US$
16.1 Interest Payable on Deposits
Individual accountsCorporate accountsTerm depositsLong term borrowing
115,39619,013
312,995-
447,404
328,643118,343237,188
4,689
688,863
Dec-16US$
Dec-15US$
16.2 Long Term Borrowing
Opening balanceLoan proceedsRepayment
Balance as at December 31, 2016
815,553-
(815,553) -
2,540,803-
(1,725,250)
815,553
Note
16.1
16.2
Dec-16US$
Dec-15US$
17. SHARE CAPITAL AND RESERVES17.1 Share capital
AuthorisedOrdinary shares of $1 each Issued and fully paid Ordinary shares
50,000,000
6,729,662
50,000,000
6,729,662
Dec-16US$
Dec-15US$
Opening balanceDividend declaredDividend paid
Dividend payable as at December 31
- 1,976,878
(1,976,878)
-
- 313,021
(313,021)
-
18. PENSION ARRANGEMENTS
18.1 Defined benefit pension plan
The Bank contributes to a defined benefit plan which is administered by the Communication and Allied Industry Pension Fund (CAIPF). The fund is run collectively for the former Posts and Telecommunications companies.
Employees’ benefits are determined by the length of their service and the participating entities have no realistic means of withdrawing from the plan without paying a contribution for the benefits earned by employees up to the date of withdrawal. Such a plan creates actuarial risk for the entity, if the ultimate cost of benefits already earned at the end of the reporting period is more than expected, the entity will have either to increase its contributions or to persuade employees to accept a reduction in benefits.
The Bank has accounted for the defined benefit plan as if it were a defined contribution plan because sufficient information is not available to use defined benefit accounting in line with the requirements of IAS 19, as it is not possible for the pension fund to allocate the plan assets to each of the contributing companies separately. The latest Actuarial report provided to the Bank is as at 31 December 2015. The report does not show the following information which is critical for Defined Benefit accounting purposes:• Reconciliation of the present value of the defined benefit obligation and plan assets;• The past and current service costs, gains and losses arising from settlements, as well as net interest on the net defined benefit obligation;• Re-measurements of the net defined benefit liability or asset comprising actuarial gains and/or losses to be recognised in other comprehensive income;• Disaggregation of plan assets by nature and risk of those assets i.e. those with a quoted market price in an active market and those which do not have;
17.2 Capital Contribution ReserveThe government issued $20 million treasury bills at 0.00001% on 30 November 2015 towards the recapitalization of the Bank. They were subsequently reissued on the 26th of February 2016 at an interest rate of 1% on maturity. The bills have tenure of 10 years and are redeemable in November 2025. The treasury bills were initially accounted for at their fair value using a discount rate of 5% which is the discount rate used for similar financial instruments issued on the market. Subsequently, the treasury bills are measured at amortised cost.
17.3 Mark- to-market reserveThe mark-to-market reserve includes the cumulative net change in the fair value of equity investments classified as financial assets at fair value through other comprehensive income. When such equity instruments are de-recognized, the related cumulative amount in the mark- to- market reserve is transferred to retained earnings.
17.4 Revaluation reserveThe revaluation reserve arose from the net change in the value of properties as a result of a revaluation exercise carried out in 2015.
17.5 Dividend The Board of Directors approved a dividend of 29.3756 US cents per share in year 2016 (2015: 4.6514 US cents per share).
• Disclosure of fair value of the transferable financial instruments held as plan assets and plan assets that are property occupied and• The key risks to which the fund is exposed as well as the sensitivity of defined benefit obligation to changes in actuarial assumptions.
In the current year the Bank made contributions amounting to US$1,128,410 (2015: US$986,449). The expected contributions to the plan for the next annual reporting period are US$1,142,484.
The Actuarial Valuation report prepared as at 31 December 2015 shows that the Bank had a funding deficit of $4,775,024 resulting from a past service liability of $8,790,701 whilst share of assets was $4,015,677.
It was not possible for the Pension Fund to allocate the plan assets to each of the companies separately thus, the share of assets was determined using each entity’s proportion of past service liability which may not be a realistic assumption.
The level of participation of the Bank in the plan measured by the Bank’s proportion of the total pensionable emoluments was 12% and the Bank’s proportion of the total number of active members entitled to benefits was also 12%.
18.2 NSSA PensionThe National Social Security Authority which is a defined contribution fund was introduced on October 1, 1994 and with e�ect from that date all employees are members of the National Pension Scheme, to which both the Bank and its employees contribute as follows:Employees: 3.5% of the monthly basic salary to a maximum of $24.50Bank: 3.5% of the monthly basic salary to a maximum of $24.50
The Bank also contributes 1.25% towards Workers’ Compensation Insurance Fund (WCIF) on behalf of its employees.
Total amount charged through the statement of profit or loss and other comprehensive income during the year under review amounted to US$126,005 (2015: US$119,103).
19. EMPLOYEES
The average number of permanent persons employed by the Bank during the reporting period was 341 (December 2015:333).
20. RELATED PARTY DISCLOSURES
20.1.1 Compensation of key management personnel of the Bank
20.1.2 Loans to key management personnel of the Bank
Fees and other emoluments
Board fees relate to retainer and sitting fees paid to sevennon-executive directors.
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Page 4
Savings Account
Teach them young to Save
Tax Free Interest Ratesfrom 6.5% to 9.5% per annum
Teach them young to Save
Teach them young to Save
Teach them young
Page 5
DIRECTORS: M Dzumbunu, I. P. Ndlovu, O Jambwa, I Mvere, M Mureriwa, C Nyamutswa, N. C. Chindomu, A Kandlela*, P Shuro* * Executive
Abridged Audited Financial Results for the year ended 31 December 2016
Age Analysis of past due but not impaired loans and investments by class of financial assets
Dec -16
Type of financial asset
Loans and advances
Total credit risk exposure
Less than 30 days
US$
122,329
122,329
31 - 90 daysUS$
199,797
199,797
91 - 180 days
US$
2,100,316
2,100,316
181 - 360 days
US$
2,022,848
2,022,848
361+days US$
-
-
Total US$
4,445,290
4,445,290
Dec -15
Type of financial asset
Loans and advances
Total credit risk exposure
Less than 30 days
US$
89,260
89,260
31 - 90 daysUS$
193,188
193,188
91 - 180 days
US$
161,842
161,842
181 - 360 days
US$
-
-
361+days US$
-
-
Total US$
444,290
444,290
21.5.3 Collateral heldThe amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters.
The main types of collateral obtained are as follows:• For money market assets, treasury bills are held• For loans and advances, mortgage bonds over immovable properties, cash covers, treasury bills and notarial general covering bonds are held.
The Bank held collateral as detailed below:
Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for impairment losses.
It is the Bank's policy to dispose of repossessed properties in an orderly manner. The proceeds are used to reduce or repay the outstanding claim. In general, the Bank does not occupy repossessed properties for business use.
21.5.4 Collateral RepossessedThe Bank took possession of collateral in the form of immovable property with a carrying value of $52,527 during the year ($556,140: 2015).
21.5.5 Carrying amount of assets whose terms have been renegotiatedThe table below shows the carrying amount of renegotiated assets;
Dec-16US$
6,600,20512,920,000
350,00024,000
19,894,205
Mortgage bonds over immovable propertyTreasury billsNotarial general covering bondsCash cover
Dec-15US$
7,880,65510,365,000
1,134,000100,500
19,480,155
Dec -16 US$
275,000
275,000
Loans and advances to customers
Corporate loans
Dec-15US$
689,000
689,000
21.5.6 Commitments and guaranteesTo meet the needs of customers the Bank enters into commitments and guarantees. Even though these obligations may not be recognized on the statement of financial position, they do contain credit risk and are therefore part of the overall risk for the Bank.
As at December 31, 2016, the Bank had no extended guarantees (2015; Nil).
The maximum exposure to credit risk relating to a financial guarantee is the maximum amount the Bank could pay if the guarantee is called upon. The maximum exposure to credit risk relating to a loan commitment is the full amount of the commitment. In both cases, the maximum risk exposure is significantly greater than the amount recognized as a liability in the statement of financial position.
21.6 Liquidity riskThis is the risk of the Bank being unable to meet its current and future financial obligations timely. Liquidity risk is inherent in the mismatch caused by borrowing short and lending long. In acute situations, it is evidenced by failure to repay depositors on demand or inability to fund proceeds of credit that has been extended. In the management of this risk, the Bank endeavors to preserve reliable, stable and cost e�ective sources of funds in order to timely meet all financial obligations as they fall due. The Bank considers high quality assets, strong earnings and solid capital adequacy ratios as key for its success. The Bank also maintains a portfolio of liquid assets comprising inter-Bank placements and marketable securities that are easily convertible into cash, in its readiness for unforeseen and short term demands on liquidity.
The Bank’s management of liquid assets is designed to ensure adequate liquidity even in very highly stressed scenarios. The Bank also manages this risk through adherence to assets and liability management processes and requirements which are driven by the relevant management and Board committees.
SECTORAL ANALYSIS BY INDUSTRY
IndividualsDistributionManufacturingFinanceAgricultureMiningOther Services Money market assetsFinance
Capitalisation treasury billsFinance
Total credit risk exposure
Dec-16US$
62,042,6086,316,8652,258,848
821,431393,126
9531,102,851
72,936,682
40,146,535
13,072,222
126,155,439
%
49.18%5.01%1.79%0.65%0.32%0.00%0.87%
57.82%
31.82%
10.36%
100.00%
Dec-15US$
65,860,9046,270,2412,827,697
949,986361,104
16,9561,928,343
78,215,231
22,803,993
12,280,000
113,299,224
%
58.13%5.53%2.50%0.84%0.32%0.01%1.70%
69.03%
20.13%
10.84%
100.00%
21.5.2 Credit quality by class of financial assetsThe credit quality of financial assets is managed by the Bank using internal credit ratings. The table below shows the credit quality by class for all financial assets exposed to credit risk, based on the Bank’s internal credit rating system. The amount represented is gross of impairment allowances.
Dec-16
Type offinancial asset
Loans and advances Interbank placements Treasury bills
Total Credit exposure
High gradeUS$
59,257,9976,265,794
45,953,508
111,477,299
Standard Grade
US$
1,502,198-
1,502,198
Substandard Grade
US$
876,745-
876,745
Past due but not impaired
US$
4,445,290-
4,445,290
ImpairedUS$
6,854,452999,455
7,853,907
TotalUS$
72,936,6827,265,249
45,953,508
126,155,439
Neither past due nor impaired
Dec-15
Type offinancial asset
Loans and advances Interbank placements Treasury bills
Total Credit exposure
High gradeUS$
68,941,6765,316,224
28,763,634
103,021,534
Standard Grade
US$
1,662,223-
1,662,223
Substandard Grade
US$
341,021-
341,021
Past due but not impaired
US$
444,290-
444,290
ImpairedUS$
6,826,0211,004,135
7,830,156
TotalUS$
78,215,2316,320,359
28,763,634
113,299,224
Neither past due nor impaired
The Bank has independent compliance and audit functions to ensure compliance with regulatory and statutory requirements. Through relevant Committees, the Board plays an important role in ensuring a robust risk management philosophy.
21.2 Risk measurement and reporting systemsRisk assessment is based on probability of occurrence and severity of impact with the view of coming up with appropriate remedial actions.
The Bank’s risk management process encompasses the following dimensions:• Identification;• Measurement;• Controlling and• Monitoring.
21.3 ComplianceThe Bank has an independent compliance function that ensures the Bank complies with regulatory and statutory requirements. To this end, a comprehensive compliance template has been put in place to ensure all compliance issues are closely monitored and enforced.
21.4 Excessive risk concentrationConcentration risk arises when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic, political or other conditions. Concentrations indicate the relative sensitivity of the Bank's performance to developments a�ecting a particular industry or geographical location. In order to avoid excessive concentration risk, the Bank has set limits for its lending to ensure that an acceptable ratio is maintained between customer deposits and lending. These lending limits are also broken down into business sector limits to ensure the Bank is not over-exposed in any single business sector. Exposures are monitored on a daily basis and monthly using monthly management reports. Prudent sanctioning of any new lending is a key mitigating factor. 21.5 Credit risk Credit risk is principally controlled by establishing and enforcing authorization limits and by defining exposure levels to counterparties. Periodic monitoring of positions ensures that both prudential and internal thresholds are not exceeded thereby managing concentration risk. The Bank also remains cautious in its lending business to minimize exposure.
21.5.1 Exposure to credit riskThe bank’s total exposure to credit risk as of December 31, 2016 was $126.16 million (Dec 2015: $113.30 million) before taking account of collateral of $19.89 million (Dec 2015: $19.48 million) net of such protection. The following table shows the total exposure to credit risk for money market investments as well as loans and advances to customers by industry sector before the e�ect of mitigation through collateral agreements. Amounts shown are gross of impairment allowances.
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DIRECTORS: M Dzumbunu, I. P. Ndlovu, O Jambwa, I Mvere, M Mureriwa, C Nyamutswa, N. C. Chindomu, A Kandlela*, P Shuro* * Executive
Abridged Audited Financial Results for the year ended 31 December 2016
Dec - 16
ASSETSCash and cash equivalents AdvancesInvestments
LIABILITIESDepositsLong term borrowing
Liquidity gap Cumulative gap
Dec-15
ASSETS Cash and cash equivalents AdvancesInvestments
LIABILITIESDepositsLong term borrowing
Liquidity gapCumulative gap
Up to1 month
US$
23,354,7824,955,1714,818,477
33,128,430
27,399,074-
27,399,074
5,729,3565,729,356
Up to 1 month US$
3,586,5164,775,9699,120,178
17,482,663
30,200,781132,925
30,336,706
(12,854,043)(12,854,043)
1 to 3 months
US$
-14,485,377
6,192,08520,677,462
20,746,291-
20,746,291
(68,829)5,660,527
1 to 3 months
US$
-21,835,741
5,316,224
27,151,965
28,527,819271,851
28,799,670
(1,647,705)(14,501,748)
3 months to 1 year
US$
-32,406,57320,361,57952,768,152
25,521,870-
25,521,870
27,246,28233,906,809
3 months to 1 year
US$
-35,082,926
8,367,591
43,450,517
26,946,511407,777
27,354,288
16,096,2291,594,481
1 year to 5 years
US$
-20,081,247
8,774,39428,855,641
41,040,006-
41,040,006
(12,184,365)20,722,444
1 year to 5 years
US$
-15,545,919
-
15,545,919
8,009,176-
8,009,176
7,536,7439,131,224
Above 5 years
US$
-1,008,313
13,072,22214,080,535
---
14,080,53534,802,979
Above 5 years
US$
-974,676
12,280,000
13,254,676
--
-
13,254,67622,385,900
Total
US$
23,354,78272,936,68153,218,757
149,510,220
114,707,241-
114,707,241
34,802,97934,802,979
Total US$
3,586,51678,215,23135,083,993
116,885,740
93,684,287815,553
94,499,840
22,385,90022,385,900
21.7 Market riskMarket risk is the potential impact on earnings caused by unfavourable changes in market prices, interest rates and foreign exchange rates.
21.8 Price riskEquity price risk is the possibility of loss arising from adverse movements in equity prices due to market volatility. This has the e�ect of a�ecting the fair value of scrip investments and hence the size of the Bank’s statement of financial position and shareholder’s value.
Changes on the equity market would have e�ect on financial assets at fair value through other comprehensive income and mark-to-market reserves on the Statement of financial position through fluctuations in the fair values of the equities as shown in the information below
Dec - 16
Financial assets at fair value through other comprehensive incomeIncrease/(decrease)
Dec-15
Financial assets at fair value through other comprehensive incomeIncrease/(decrease)
Fair value as at 31-12-2016
US$
728,446
Fair value as at 31-12-2015
US$
1,609,200
10% increase in priceUS$
801,29172,845
10% increase in priceUS$
1,770,120160,920
5% Decrease in priceUS$
692,024(36,422)
5% Decrease in priceUS$
1,528,740(80,460)
21.9 Interest rate risk This mostly emanates from re-pricing risk. This risk relates to the timing di�erences between the ability to adjust rates earned on assets or those paid on liabilities to changes in market interest rates, which would result in a negative impact on interest income. While there are no absolute measures to control the e�ects of interest rate movements, protection is o�ered by managing the maturity profile of customer balances and investment holdings and maintaining margins, wherever possible, as changes occur. The Bank manages interest rate exposures through limits, policy guidelines and control mechanisms as well as tools and techniques formulated by the Assets and liability committee. Amongst the tools used to measure and manage interest rate risk exposures are the gap analysis, duration matching and use of the rate sensitive assets to rate sensitive liabilities ratio (RSA/RSL) ratio.
21.6.1 Liquid asset ratioThe Bank is required to keep a minimum regulatory liquidity ratio of 30%, according to Reserve Bank of Zimbabwe guidelines. The liquid asset ratio was 54% as at 31 December 2016 (26%: December 2015). Capitalisation treasury bills are excluded from liquid assets.
21.6.2 Liquidity Gap AnalysisThe following liquidity gap analysis shows the extent to which the Bank was exposed to liquidity risk as at December 31, 2016;
Dec - 16
ASSETSCash and cash equivalents
Advances and Other assetsInvestmentsProperty, plant and equipmentIntangible assets
LIABILITIES
Deposits and other liabilitiesLong term borrowingReserves
Interest ratere-pricing gap Cumulative gap
Up to1 month
US$
-
4,955,1714,818,477
--
9,773,648
27,399,074--
27,399,074
(17,625,426)
(17,625,426)
1 to 3 months
US$
-
14,485,3776,192,085
--
20,677,462
20,746,291
--
20,746,291
(68,829)(17,694,255)
3 months to 1 year
US$
-
32,406,57320,361,579
--
52,768,152
25,521,870--
25,521,870
27,246,2829,552,027
1 year to 5 years
US$
-
20,081,2478,774,394
--
28,855,641
41,040,006
--
41,040,006
(12,184,365)(2,632,338)
Above 5 years
US$
-
1,008,31313,072,222
--
14,080,535
----
14,080,53511,448,197
Non- interest bearing
US$
23,354,782
6,926,027143,991
5,038,1242,714,554
38,177,478
8,433,471-
41,192,20449,625,675
(11,448,197)-
Total
US$
23,354,782
79,862,70853,362,748
5,038,1242,714,554
164,332,916
123,140,712-
41,192,204164,332,916
--
21.9.1 Interest Rate Re-pricing Gap AnalysisThe following interest rate re-pricing gap analysis shows the extent to which the Bank was exposed to interest rate riskas at December 31, 2016;
Dec-15
ASSETSCash and cash equivalents
Advances and Other assetsInvestmentsProperty, plant and equipmentIntangible assets
LIABILITIES
Deposits and other liabilitiesLong term borrowingReserves
Interest ratere-pricing gap Cumulative gap
Up to1 month
US$
-
4,775,9699,120,178
--
13,896,147
30,200,781135,925
-
30,336,706
(16,440,559)(16,440,559)
1 to 3 months
US$
-
21,835,7415,316,224
-
-
27,151,965
28,527,819271,851
-
28,799,670
(1,647,705)(18,088,264)
3 months to 1 year
US$
-
35,082,9268,367,591
--
43,450,517
26,946,511407,777
-
27,354,288
16,096,229(1,992,035)
1 year to 5 years
US$
-
15,545,919-
-
-
15,545,919
8,009,176--
8,009,176
7,536,7435,544,708
Above 5 years
US$
-
974,67612,280,000
-
-
13,254,676
---
-
13,254,67618,799,384
Non- interest bearing
US$
3,586,516
7,325,8811,025,065
5,563,3502,899,270
20,400,082
6,199,002-
33,000,464
39,199,466
(18,799,384)-
Total US$
3,586,516
85,541,11236,109,058
5,563,3502,899,270
133,699,306
99,883,289815,553
33,000,464
133,699,306
--
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Dec - 16
Total assets
Total liabilities, equity and reserves
Dec - 15
Total assets
Total liabilities, equity and reserves
TOTAL (US$)
164,332,916
164,332,916
133,699,306
133,699,306
US$
164,301,720
164,200,061
132,556,463
133,149,267
ZAR
92,467
196,406
1,014,281
608,857
BWP
232
232
16,264
225
GBP
408
408
21,285
496
EURO
(61,911)
(64,191)
91,013
(59,539)
JPY
-
-
-
-
The exchange rates applicable during the financial period were as follows:
ZARPulaGBPEuroJPY
Dec-16
13.614310.5862
1.22791.0528
116.7610
Dec-15
15.549611.1835
1.48271.0931
-
Capital ReservesCapital contribution reserveMark- to- market reservesRevenue reservesAdvances to insidersCapital allocated to market and operational risk
Tier 1 CapitalRevaluation ReservesGeneral provisionsTier 1 & 2 Capital Tier 3 Capital allocated for market and operational risk
Risk weighted assets Tier 1%Tier 2%Tier 3%
Capital adequacy ratio
RBZ Minimum required capital adequacy ratio
Dec-16US$
6,729,66212,900,000
(467,454)21,623,164
(295,727)-
40,489,645406,832619,862
41,516,339
-
133,851,072
30.25%0.77%0.00%
31.02%
12%
Dec-15US$
6,729,66212,280,000
(339,642)13,923,612
(354,059)-
32,239,573406,832712,025
33,358,430
-
149,827,747
21.52%0.75%0.00%
22.27%
12%
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21.11 Operational risk Operational risk is inherent to the Bank, and is over and above, credit, interest rate exposure and capital risks. Operational risk relates specifically to fraud, unauthorised transactions by employees, by persons outside the Bank; errors, omissions and commissions in transaction processing, system and process failure and breaches on the Bank's system of internal compliance. The operational control environment of the Bank is extremely important, especially given high volumes of transactions that pass through the system each day. This gives rise to the need for substantial and e�ective controls to be complied with at all times. The Bank manages operational risk through risk transfer (insurance cover), procedural guidelines, policies, sta� training, segregation of duties, internal audits and business continuity management that includes business continuity and disaster recovery plans.
21.12 Reputation risk Reputational risk is the risk of loss arising from the adverse perception of the image of the Bank by customers, counterparties, investors or regulators. This is particularly relevant on two fronts; Firstly, with the ethical stance that the Bank takes and, secondly, the fact that competition entails that the Bank has to convince customers that it is credible and can o�er at least the basic, secure services expected of high quality Banks.
The Bank is also susceptible to the reputation of its wider structural organisation, and its mandate of ensuring financial inclusion. The Bank sees this risk as a knock-on of other risks materializing. Reputational risk is seen as compounding the e�ect of other risks, such as strategy, fraud and regulatory risk. Reputational risk has not been modeled in isolation but is considered throughout the Bank’s ongoing risk review process, and is built into the assessment of other risks.
The operational systems and controls in place help to mitigate this risk. The loyal customer base also provides some immunity although this could be challenged in the event of the Bank’s reputation su�ering.
21.13 Capital risk This refers to the risk that the Bank’s capital may not be adequate to absorb all the losses that it may incur. In this regard, the Bank embarks on risk based capital planning through the internal capital adequacy assessment process (ICAAP) to come up with a capital level that is commensurate with the nature and extent of risk it faces. The Bank’s capital has invariably been above the ICAAP determined capital level over the years, an indication that the Bank maintains a healthy capital base.
For assessing capital risk, the loss is assessed in terms of the impact on anticipated earnings (profit) and capital (reserves). The knock-on e�ects of all other risks that impact on the Bank are also considered. 21.14 Compliance and legal riskThis refers to the risk on earnings and capital arising from violations of or non-compliance with laws, rules, regulations, internal policies and authority levels, prescribed practices and ethical standards. The Bank manages this risk by having a compliance policy framework, aligned to the Bank's business model. The policy is regularly reviewed by the Bank Risk management department and incidents of non-compliance is reported to the Board for the requisite corrective action.
The Bank incurred a penalty expense of $300,000 to the Reserve Bank of Zimbabwe relating to unsanctioned release of bond notes images. This amount is included in administration costs under Note 9. 21.15 Strategic risk Strategic risk arises from business decisions made in conditions of uncertainty over actions of competitors and service providers and more importantly through exogenous variables to the Bank.
The Bank recognises that the rapidly changing nature of financial markets and the economic environment is such that long term planning is often disturbed by fundamental changes which the Bank should rapidly respond to for sustainable growth and operational and strategic competitiveness. The change over to the multicurrency economic dispensation and upward economic growth, albeit slowly, have brought about some semblance of stability that allows proper business planning. The Bank's Board of directors provides oversight for strategic risk through an approved strategic plan and operational strategy framework including scheduled periodic board and executive management meetings.
22. CAPITAL MANAGEMENT Capital management is considered key for the Bank as a going concern. The Bank’s capital management framework serves to ensure that the Bank is capitalized in line with the requirements of its business lines and also in compliance with the recommendations of the Reserve Bank of Zimbabwe and International standards. The Bank’s capital management objectives are to:• Maintain sufficient capital resources to meet board set standards and set standards in accordance with regulatory requirements.• Maintain sufficient capital resources to support the Bank’s risk profile.• Allocate capital to business lines to support the Bank’s strategic objectives including optimizing return.• Ensure the Bank holds adequate capital in order to achieve the target capital to withhold the impact of potential stress events.
The Bank manages its capital base to achieve a prudent balance between maintaining ideal capital ratios to support business growth and depositors’ confidence as well as providing competitive returns.
In 2015, the Bank received additional capital from the shareholder worth $12.28 million in the form of 10 year treasury bills with a maturity value of $20 million. As at 31 December 2016, the treasury bills were worth $12,900,000.
22.1 Capital Adequacy Ratio
21.10 Foreign exchange riskForeign exchange risk is the risk that arises from adverse changes or movements in foreign exchange rates and emanates from a mismatch between foreign currency inflows and outflows.
The foreign currency position of the Bank expressed in US$ as at December 31, 2016 was as follows;
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DIRECTORS: M Dzumbunu, I. P. Ndlovu, O Jambwa, I Mvere, M Mureriwa, C Nyamutswa, N. C. Chindomu, A Kandlela*, P Shuro* * Executive
Abridged Audited Financial Results for the year ended 31 December 2016
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